Load Rate Negotiations in Truck Dispatching
Today we will discuss load rate negotiations and how you, as an independent truck dispatcher, can get the highest rate possible.
As you may know, many videos and articles teach people how to negotiate the highest load rate possible. Some of them suggest that you just have to stand your ground and be strong. And some may suggest you utilize certain techniques. Others may have a seemingly magical sales script that you can use to get the highest rate possible. But in my opinion, it is not about how. It is about when.
Why Is When You Negotiate More Important Than How?
In my experience, it's quite simple. On the market, you have to determine who has the upper hand. Is that your client, a motor carrier or a freight broker? For example, in our truck dispatcher training course, we have multiple recordings of load-booking conversations. You can hear dispatchers talk to the freight brokers and ask that same question.
On some days, they get the rates they want, and on others, they don't. Why is this happening? Well, again, we have to determine who has the upper hand. However, before we discuss how to determine this, we need to talk about rate formation.
How Is the Freight Rate Being Determined on the Market?
Rates are determined in a very similar way to prices, and that is by supply and demand. For example, if we have one hundred loads in, let's say, Atlanta that need to be moved, and there are only 10 trucks available to move them, freight brokers will have to compete for these 10 trucks to move their loads. They will be willing to pay a higher price or rate to motor carriers.
Alternatively, there could be only 10 loads and a hundred trucks. That means the trucks must compete for the 10 available loads, allowing the brokers to drive the price down as low as possible.
How Do You Determine Who Has the Upper Hand?
Now that we have that information out of the way, we can determine who has the upper hand. That is very often done by watching the load-to-truck ratio, also known as the LTR, for each state. If there are many more loads than trucks in North Carolina, then it’s likely trucking companies will have the upper hand and vice versa. If there are fewer loads than trucks in Florida, that means freight brokers are more likely to have the upper hand.
How Do You Find Out the LTR for Most States?
Most load boards will provide you with this information. You can log in and see each state’s data, depending on the truck type.
However, I want you to be cautious with this information because, as an example, you may see a high load-to-truck ratio in Texas, but if your truck is sitting somewhere in the middle of nowhere close to the border with New Mexico, the abundance of freight in Houston will not help you in any way.
So, to get the most accurate sense of the current market conditions, what you have to do is set up a search in the area where your client’s truck is located and see how many loads show up. If there are a lot of load options, you could probably call and negotiate as higher rates. It should not be a problem because a lot of freight needs to be moved.
And vice versa:
If you set up a hundred-mile search radius on a load board and there are only a few load options available, you can negotiate all you want, but you are probably going to be competing against other trucking companies who might be willing to take lower rates to get out of this low freight area. And good luck with your magical strategy or script. More likely, you will get stuck if you continue negotiating.
If you don't want your truck to get stuck and you don't want to deal with the situation when there is a low freight volume, you may want to keep your truck in busy areas. Those are usually closer to larger cities, production sites, etc. If you send your truck to the middle of nowhere, the conditions are not likely to be in your favor from a negotiation standpoint.
In summary, I would like to point out that it is not about how or what you're going to tell the freight broker. It is about when and what conditions you will face when negotiating a rate. Your ability to quickly determine whether you have the upper hand will help you achieve greater success in your negotiations.
If you sense that a freight broker needs your truck more than you need their load, ask for whatever you want. There is a reasonable chance you will get it. However, if you feel that you need this load more than they need your truck, then you may want to jump on this opportunity as it is without trying to negotiate a higher rate to get the hell out of this bad area.
The good news is the more phone calls you make as a truck dispatcher, the more experience you gain, and the easier it will become for you to determine market conditions. With a glimpse at a few load boards and making a few phone calls, you will know exactly where you stand.
Ultimately, the key to success as a truck dispatcher is ongoing education and training. By staying up-to-date with industry trends and market conditions, you can position yourself for success and build a thriving business. Enrolling in truck dispatcher courses and investing in your education is a critical step in achieving your goals and taking yourself to the next level.
© By Roman Shmundyak April 2023
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